Crypto.com waits as Ninth Circuit weighs prediction market rules

Taini Spinola, Crypto.com's head of regulatory affairs, made a decision earlier this year that the company has now staked its near-term US market access on: rather than fight state-level enforcement separately, let the Ninth Circuit settle the federal preemption question first. That is a reasonable bet in a normal regulatory environment. This is not a normal regulatory environment.

The core issue before the Ninth Circuit is whether CFTC jurisdiction over designated contract markets preempts state authority to regulate — or ban — prediction market contracts. Crypto.com agreed to hold its own challenge in abeyance pending that ruling. The logic is sound. A clean federal preemption win would clear the board in one move. But the CFTC's Innovation Advisory Committee meeting last week revealed something that complicates the timeline: the agency is not close to a coherent regulatory framework, and the gap between what it has and what the courts will need is wider than the Ninth Circuit docket suggests.

Terry Duffy put the number on the table himself. Twenty-five hundred self-certifications since January 2025, none opposed. Duffy's read was that the process is broken. Kalshi's Luana Lopes Lara read the same number as proof the system works. Both are partially right, which is the structural problem. The CFTC has allowed a market to grow faster than its own rulemaking, and the Ninth Circuit will now be asked to rule on federal preemption at a moment when the federal framework being invoked is itself unresolved.

I have watched this shape before, not in prediction markets, but in early derivatives regulation after Dodd-Frank. Courts asked to enforce federal primacy when the federal agency hasn't finished writing the rules it is supposedly primary in tend to produce narrow rulings that satisfy neither side and require a second trip to the same courthouse. The Ninth Circuit may give Crypto.com a partial win — preemption on some contract types, silence on others — and the state enforcement pressure resumes on the unresolved categories.

The mention markets question is where I think the consensus is most wrong. Both Duffy and Robinhood's Vlad Tenev flagged manipulation risk in contracts tied to what public figures say during speeches or earnings calls. The room treated this as a consumer protection issue. It is also a securities law question that the CFTC does not fully own, and the moment the SEC decides mention markets on publicly traded companies touch its jurisdiction, the preemption argument that Crypto.com is waiting on becomes a three-body problem. Whether the SEC has taken a formal position on this is not on the public record, but the underlying legal theory is not obscure, and the prediction market industry has been building volume in exactly this category.

My bias runs toward the downside scenario, and I am weighting that explicitly here. It is possible the Ninth Circuit rules broadly and cleanly, the CFTC finalizes its roadmap, and Crypto.com's patience turns out to be the correct play. I put that outcome at the lower end of what the current docket optimism implies.